US Banks pass annual Fed stress tests

The largest United States banks have passed annual stress tests set by the Federal Reserve, in a testament to the health of the banking system.

JPMorgan Chase & Co increased its dividend by US$0.06 to US$0.56 per share and said it could spend up to US$19.4 billion on share repurchases.

Shares in the biggest USA banks rose on Thursday after they revealed buyback and dividend plans that topped analyst expectations after the Federal Reserve approved capital proposals in its annual stress test program.

USA firms have substantially increased their capital since the first round of stress tests led by the Federal Reserve in 2009.

This year Capital One Financial was the lone bank cited by the Fed.

The Fed found that US firms' common equity capital ratio has more than double, rising to 12.5 percent at the end of Q1 2017 from 5.5 percent in Q1 2009, a total increase of $750 billion to $1.25 trillion.

Capital One, because of its conditional status, opted to keep its dividend at its current level but is planning a share repurchase.

The Comprehensive Capital Analysis and Review, in its seventh year, evaluates the capital planning processes and capital adequacy of the largest US -based bank holding companies, including the firms' planned capital actions that also include potential major acquisitions.

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KeyCorp also recently announced a dividend for shareholders that was paid on Thursday the 15th of June 2017.

The Federal Reserve today approved the capital plans of 34 large banks participating in the Comprehensive Capital Analysis and Review. Bank of America and Morgan Stanley hiked their quarterly dividends to 12 cents a share and 25 cents a share, respectively. In the last earnings report the EPS was $0.86 and is expected to be $1.33 for the current year with 1,096,107,000 shares presently outstanding.

Shares of all three rose more than 1.5 per cent in extended trading in NY on Wednesday.

Banks were also given a clean bill of health in the initial round of "stress test" results released last week.

As for scandal-plagued Wells Fargo, Sandler O'Neill's principal Jeffery J. Harte said there's a "fairly high likelihood" the Fed will object to the firm's request for higher capital return.

Powell, the Fed's interim regulatory czar, told Senate lawmakers last week if the country's largest banks continue to meet regulators expectations, it would be "appropriate" to remove the subjective aspect of the yearly test altogether.

Goldman Sachs did not give details on its plan to return capital to shareholders. The firm's plan also includes an up to $11.5 billion of common stock repurchases, compared to $8.3 billion in share repurchases in the four quarters ended in the first quarter of 2017. The Wall Street Journal first pointed out the potential change Wednesday. U.S. Bancorp's common stock may be repurchased through June 2018 in the open market or in privately negotiated transactions.

The Fed's blessing of the big banks comes at a time when the central bank expects to raise benchmark interest rates once more this year.

(Copyright © 2015. All Rights Reserved.)
 
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